Blockchain Guide for Insurers

Blockchain is gaining popularity across industries. While the technology holds long-term promise of transformation and business model changes, there are few people in business and IT communities who understand it in detail, and there is little evidence on real adoption and successful  implementations of blockchain projects. While you may have come across numerous use cases of blockchain covering asset transfer, asset management, supply chain management, payments, reconciliation, digitization of information, digital identities and smart contracts, giving the illusion of automating and simplifying everything under the universe, the reality is that blockchain technology is still evolving, very complex, unproven and lacking in the basic enterprise technology adoption hygiene that is needed to build real use cases. Technology hype or a game-changer: Where do you stand in blockchain adoption? The unfortunate state of many industries is that someone doing something “cool” on any new technology is seen as an innovator. So, many CXOs believe that their company must do something innovative to stay on the radar and in the limelight to attract investors and analysts’ attention. Biased by media news and growing articles on blockchain, they don’t want to be left behind. Innovation often demands business values that are tangible, measurable and sustainable. The unfortunate state of blockchain is that it still lacks basic tenets of innovation, i.e. desirability, feasibility and viability. The “desirability” aspects of blockchain lack the “real problem” that companies are trying to solve for customers. The “feasibility” aspects confront the immaturity and still evolving nature of blockchain technology to make it business- or enterprise- ready. The “viability” aspects fail to relate to or justify returns on investment (ROI) leveraging blockchain technologies. In the current state, blockchain technology is not ready to deliver meaningful value to enterprises! Blockchain: What is there in it for insurance companies? Blockchain technology often relates to trust, transparency and security/immutability aspects in the mind of insurance stakeholders. These aspects are key for insurance CXOs! And that is the reason why insurers are keen to learn, adopt and explore blockchain. See also: Blockchain: the Next Big Wave?   Few insurers are reimagining insurance as an “intermediaries-free” ecosystem where blockchain would connect an insurer with customers and other ecosystem partners seamlessly in a trusted, decentralized manner, helping sell the right product to the right buyer with ease while improving compliance, minimizing operational cost and nullifying frauds. This is an ideal-world scenario that is perhaps decades away from reality. One may promise to automate the entire insurance value chain using any emerging technology, but the reality is that insurance is not that easy for a paradigm shift. Blockchain is still a new technology and is still a few years away from being accepted at enterprise levels. Opportunities, challenges and realities of blockchain: A pragmatic view While blockchain's potential cannot be underestimated, it is still in pilot and proof-of-concepts stages in many industries. The key enterprise technology vendors in this space (IBM, Microsoft, Oracle, Amazon, etc.) are just gearing up. The most popular platform players in this space are Ethereum, Hyperledger Fabric, R3 Corda and Ripple, offering permissioned and permission-less blockchain. The continuing changes in these core platforms are another reason that this technology is a bit unstable. But blockchain technology has received backing from top executives across industries and backing of more than $2 billion in the last two years. Where do you start with blockchain? Don’t expect miracles. Treat blockchain like any other emerging technology that is an enabler for your business and watch the market carefully until it takes off. Let me assure that you have not missed much if you did not start experimenting with blockchain in the last 18 months. You may start with proof of concepts (POC) in any area of your business (underwriting and claims are best suited to begin with). Think strategic, act tactical: It is not the use case but the ecosystem that matters Once the blockchain POCs can address a few business scenarios with transactional capabilities, try integrating blockchain with one or more of your core system or applications to prove the end-to-end capabilities. You may also explore the consortium model in case you want to experiment it with other re/insurance companies and partners with whom you collaborate regularly and pick adequate use cases accordingly. The other option is to ask your preferred technology vendor or a startup company to demonstrate use case scenarios that resonate with your business. The key challenge is not the use case(s) you pick for building a blockchain POC but more about the right platform and technology partner you select for your blockchain initiatives. The commitment of technology partners and technology platform is crucial. See also: How Insurance Can Exploit Blockchain   Conclusion Blockchain technology is still evolving but holds long-term promise to transform business across industries. The technology is not enterprise-ready at the moment, and there is little evidence of real adoption within the insurance industry. But insurers must watch for progress and start their homework in choosing the right platform, partner and blockchain initiatives.